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Does Say‐on‐Pay Matter? Evidence from Say‐on‐Pay Proposals in the United States
Author(s) -
Burns Natasha,
Minnick Kristina
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12002
Subject(s) - executive compensation , compensation (psychology) , incentive , cash , business , pay for performance , accounting , finance , economics , microeconomics , psychology , psychoanalysis
We investigate the effect of say‐on‐pay (SOP) proposals on changes in executive and director compensation. Relative to non‐SOP firms, SOP firms’ total compensation to CEOs does not significantly change after the proposal. However, the mix of compensation does change—companies move away from using cash compensation toward more incentive compensation, offsetting the reduction in bonus. Further, the mix of compensation of non‐CEO executives changes similarly to that of CEOs. Compensation to directors of SOP firms increases less than non‐SOP firms. Firms whose CEOs are well compensated, especially with cash‐based compensation, are most likely to receive a proposal.